Tuesday 10 May 2011 05.17 EDT
First published on Tuesday 10 May 2011 05.17 EDT

So now we know why the white paper on public services has been delayed for four months: the government appears to have got cold feet about the wholesale outsourcing of public services.

But does the leaked memo by John Cridland, director general of the CBI, to Cabinet Office minister, Francis Maude, really indicate a U-turn?

The document states that ministers want to find new ways of delivering national public services such as benefits payments, tax collection, NHS services, prisons and issuing driving licenses. To achieve this it would seek to use more charities, social enterprises and employee owned mutuals and limit private sector involvement to joint ventures and not-for-profit groups.

All this is 'big society' language, which both coalition parties should find no difficulty in supporting. It is perhaps in some of the previous announcements supporting outsourcing that have been out of line with the big society concept.

One problem for the government is that in its flagship local authority, Suffolk county council, the big society experiment has just imploded. The government might be wise to tone down its rhetoric and reflect this in the white paper.

So what is the outsourcing industry to make of this? The leaked document covers mainly central government, though there is a nod at the NHS. There will be little impact on the much bigger wider public sector with which the government is dealing at arms' length. This includes local government, where councils make their own decisions, and where many outsourcings are expected within the next couple of years.

As local authorities will not co-ordinate their activity, demand could exceed the capacity of the market to deliver.

The public sector still has to provide services with less money. So if the head of a any organisation decides that outsourcing is needed to achieve this, ministers are unlikely to stand in their way. Heads of government departments would first be expected to explore the alternatives mentioned above, but the failure of the Suffolk experiment might result in their less vigorous pursuit.

Some potential outsourcing could be huge, for example implementing and managing the universal benefit, and the government has already committed itself to avoiding letting the mega-contracts of the past. So it will be keen to identify other approaches.

However, turning the government's vision into reality may be a different matter. Apart from the provision of social housing, social enterprises have been used on only a small scale by the public sector – perhaps less than 2% of local authority spend is with them and is believed to be falling.

Yet local authorities probably have the greatest experience in dealing with them. The government will need to support the market and help it develop and that will require a much longer timescale than ministers might find acceptable. It will need to learn the lessons from the Suffolk failure.

Creating "government companies" sounds little different to the large operational agencies, such as the Benefits Agency, created in the early 1990s. Other ideas such as creating joint enterprises are more suspect. There needs to be more evidence on how well existing joint enterprises are working; there also has to be something in it for the private sector.

The leaked document and delay of the white paper do not represent a U-turn on outsourcing. Outsourcing by the wider public sector will continue to increase. Private sector organisations that continue to offer up-front investment and quick implementation should also do well with central government. Competition from new service models might be the catalyst for outsourcers to offer more imaginative and innovative solutions.

However, white papers and rhetoric notwithstanding, once the lessons of the Suffolk implosion are analysed, we are likely to see the government starting to pull back from its ambitions for mutuals and social enterprises. If not quite a U-turn on the 'big society, it's certainly a big curve.

Colin Cram is a consultant and former director of the North West Centre of Excellence (NWCE).

He will be speaking at the Guardian Public Procurement Show on 14-15 June 2011. Click here for free registration to the event.